Oil Near 1-Week Low as Supply Counters Europe Optimism

Nov. 27 (Bloomberg) -- Oil traded near its lowest level in
almost a week in New York as a forecast that U.S. crude supplies
increased balanced optimism that a new agreement on aid for
Greece will help resolve Europe’s debt turmoil.

Futures were little changed, paring an earlier advance of
as much as 0.6 percent. U.S. crude inventories probably rose
500,000 barrels last week, a Bloomberg News survey of analysts
before an Energy Department report tomorrow showed. European
Union ministers agreed to help Greece manage its debt burden in
talks in Brussels that lasted 13 hours, an EU official said
early today. The OECD cut growth forecasts and warned of the
risk of a “major” global recession.

“The positive outcome on Greece has already been priced
in,” said Andrey Kryuchenkov, an analyst at VTB Capital in
London who predicts Brent crude may slide to $110 a barrel this
month. “Now attention is turning to fundamentals and they are
far from ideal.”

Crude for January delivery was at $87.96 a barrel in
electronic trading on the New York Mercantile Exchange at 1:39
p.m. London time, having gained as much as 51 cents to $88.25 a
barrel. The contract decreased 54 cents yesterday to $87.74, the
lowest since Nov. 21. Prices are down 11 percent this year.

Brent for January settlement slipped 8 cents to $111.84 a
barrel on the London-based ICE Futures Europe exchange. The
European benchmark contract was at a premium of $22.86 to West
Texas Intermediate, compared with $23.18 yesterday.

Greece Life Line

International Monetary Fund Managing Director Christine
Lagarde said after the Brussels meeting that her aim to get
Greece’s debt on a “sustainable path” was achieved in the
discussions. IMF criticism of Europe’s failure to do so had held
up an accord.

“Another life line for Greece is supportive for oil, as it
shows we are slowly working our way through the euro crisis,”
said Jeremy Friesen, a commodity strategist at Societe Generale
SA in Hong Kong. “Improvements in the euro crisis should be
positive for the euro and thus could also add some weaker-dollar
support to oil prices.”

The EU accounted for 16 percent of the world’s oil
consumption last year, according to BP Plc’s Statistical Review
of World Energy. The U.S. and China were the world’s biggest
crude users, accounting for a combined 32 percent.

Contraction Risk

The Paris-based Organization for Economic Cooperation and
Development predicted that the euro area will shrink 0.4 percent
this year and 0.1 percent next year, compared with a 0.1 percent
2012 contraction and 0.9 percent 2013 growth expected in May.

“After five years of crisis, the global economy is
weakening again,” OECD Chief Economist Pier Carlo Padoan said
today in the organization’s semi-annual Economic Outlook. “The
risk of a major contraction cannot be ruled out.”

U.S. gasoline supplies probably rose 1 million barrels,
according to the median of five analyst estimates in the
Bloomberg survey before the Energy Department report.
Distillates, a category that includes heating oil and diesel,
rose 500,000 barrels, the survey shows. The American Petroleum
Institute will release separate inventory data today.

The Organization of Petroleum Exporting Countries, which
supplies about 40 percent of the world’s oil, is unlikely to
adjust output levels at its next meeting on Dec. 12 because the
market is adequately supplied, Angola’s national representative
to the producer group said.

“If prices will be as they are at the moment, around $110
a barrel, something like that, I think the situation will keep
unchanged,” Luis Neves said today in an interview in Cape Town.
“The idea is to achieve prices that are fair not only for us,
OPEC, as exporters but also” the buyers, he said.

To contact the reporters on this story:
Ben Sharples in Melbourne at
Grant Smith in London at
gsmith52@bloomberg.net